Tax Authorities Cannot Confirm Demands Higher Than Proposed In SCN
And Quashing Of Ex-Parte GST Assessment Orders Under Section 63
1. Introduction
The Goods and Services
Tax (GST) regime emphasizes procedural fairness, transparency, and the
protection of natural justice. However, many small businesses continue to face
challenges when notices and orders are uploaded on the GST portal without
proper communication, leading to ex-parte assessments. The case of M/s
Ever Green TV vs. State Tax Officer before the Madurai Bench of the Madras
High Court is one such example where the taxpayer sought relief against an
adverse order passed without opportunity of defense.
This case highlights how orders
passed under Section 63 of the GST Act, without effective notice and in
violation of Section 75(7), can be quashed, subject to terms, to restore
fairness in tax adjudication.
2. Case Details
- Case Title:
M/s Ever Green TV v. State Tax Officer
- Case Number:
W.P.(MD) No. 21071 of 2025, W.M.P.(MD) No. 16296 of 2025
- Court:
Madurai Bench of Madras High Court
- Coram:
Hon’ble Justice C. Saravanan
- Date of Order:
01 August 2025
- Petitioner:
M/s Ever Green TV, Proprietorship firm, represented by Proprietor
Mohamed Ismail, Sivagangai
- Respondent:
State Tax Officer, Tirupathur
- Nature of Petition:
Writ of Certiorari under Article 226 of the Constitution, seeking quashing
of order in Form ASMT-15 dated 26.11.2024 and rectification order in Form
DRC-08 dated 27.11.2024.
- Subject Matter:
Challenge to best judgment assessment under Section 63 for FY
2021–22 and violation of Section 75(7) which bars confirmation of
demand beyond what is proposed in the SCN.
3. Summary of the Case
The petitioner’s
registration under GST had been cancelled in June 2018, after which a fresh
registration was obtained. During FY 2021–22, the Department issued a show
cause notice (ASMT-14) demanding ₹1,63,920. However, in the final assessment
order (ASMT-15) dated 26.11.2024, the demand was enhanced to ₹2,45,880,
along with interest and penalty. A rectification order dated 27.11.2024 further
confirmed the liability.
The petitioner argued
that the enhancement of demand beyond the SCN was impermissible under Section
75(7) of the GST Act, and that the orders were passed ex-parte without
participation, as the notices were only uploaded on the GST portal and not
effectively served. The respondent argued that the petitioner failed to respond
or appear, and thus the order was justified.
The Court quashed the
impugned orders, but imposed a condition: the petitioner must deposit 25% of
the disputed tax within 30 days and file a reply to the SCN, whereafter the
matter would be remanded for fresh adjudication with an opportunity of hearing.
4. Facts of the Case
- The petitioner, Ever Green TV,
operated a small business in Sivagangai district, Tamil Nadu.
- Its GST registration was cancelled on
04.06.2018, but later it obtained a new registration and continued
business.
- For the period 2021–22, the
Department issued a Show Cause Notice in Form ASMT-14 dated 04.09.2024,
proposing demand of ₹1,63,920 (₹81,960 CGST + ₹81,960 SGST).
- The petitioner failed to respond to
the SCN or attend personal hearing, reportedly due to oversight as notices
were uploaded only on the GST portal.
- On 26.11.2024, the State Tax
Officer passed a best judgment assessment under Section 63,
confirming demand of ₹2,45,880 (CGST ₹1,22,940 + SGST ₹1,22,940),
higher than the SCN amount.
- On 27.11.2024, a rectification
order in DRC-08 was issued, confirming tax, interest of ₹1,36,464,
and penalty of ₹2,45,880 under Section 73.
5. Submissions by the
Petitioner
The petitioner contended:
1. Violation
of Section 75(7)
o The
confirmed demand exceeded the SCN amount, contrary to Section 75(7), which
restricts adjudication to amounts proposed.
2. Denial
of Natural Justice
o No
effective opportunity of hearing was granted. Notices were only uploaded on the
portal and were not properly served, leading to an ex-parte order.
3. Cancellation
of Registration
o Due
to earlier cancellation of registration in 2018 and fresh registration
thereafter, the petitioner overlooked pending notices, which should not deprive
it of its substantive right to defend.
4. Prayer
for Relief
o The
assessment order dated 26.11.2024 and rectification order dated 27.11.2024
should be quashed as without jurisdiction.
6. Submissions by the
Respondent
The respondent,
represented by the Additional Government Pleader, submitted:
1. Petitioner’s
Own Negligence
o The
petitioner failed to monitor the GST portal despite being statutorily
obligated. Non-response to SCN implied no objection.
2. Validity
of Rectification
o The
rectification order dated 27.11.2024 was issued to correct clerical errors and
rightly confirmed tax, interest, and penalty.
3. Opportunity
Provided
o Notices
were uploaded on the portal, which is recognized as a valid mode of service
under Section 169 of the GST Act.
4. Demand
Justified
o Since
the petitioner defaulted, best judgment assessment under Section 63 was validly
invoked.
7. Observations of the
Court
Justice C. Saravanan
held:
- On Section 75(7):
The enhancement of demand in final order beyond SCN amount was impermissible.
The rectification attempt could not cure this substantive illegality.
- On Natural Justice:
While uploading notices on portal is a recognized service, the reality is
that small taxpayers may miss them. Courts have repeatedly emphasized the
need to ensure actual participation before passing adverse orders.
- On Petitioner’s Negligence:
The petitioner had indeed been negligent in not responding to notices.
However, courts have consistently exercised discretion to protect
substantive rights, especially when orders are ex-parte.
- Equitable Solution:
Following earlier precedents, the Court held that quashing ex-parte GST
orders is justified, but subject to conditions ensuring seriousness of
challenge.
8. Judgment
- The impugned ASMT-15 order dated
26.11.2024 and DRC-08 order dated 27.11.2024 were quashed.
- The matter was remitted back
to the State Tax Officer for fresh adjudication.
- The petitioner must:
- Deposit 25% of disputed tax
(₹61,470 approx.) in cash within 30 days.
- File a reply to the original SCN
within the stipulated time.
- The rectification order will be
treated as addendum to the SCN.
- The respondent shall pass a fresh
order on merits, after granting personal hearing.
- Failure to comply with deposit or
reply conditions will result in deemed dismissal of the writ petition.
9. Conclusion
The Ever Green TV
case illustrates the delicate balance courts maintain between taxpayer
negligence and principles of natural justice. While recognizing that
the petitioner ignored statutory notices, the Court also acknowledged that
orders enhancing tax beyond SCN and passed ex-parte cannot be sustained.
Key takeaways include:
- Section 75(7) protection
– tax authorities cannot confirm demands higher than proposed in SCN.
- Natural justice is paramount
– taxpayers must be heard before orders are finalized.
- Conditional relief
– courts often quash orders but impose conditions (like partial deposit)
to ensure seriousness and compliance.
- Practical message for taxpayers
– constant vigilance of GST portal is crucial to avoid ex-parte orders.
This judgment adds to a
growing line of High Court rulings providing relief to small businesses facing
procedural hardships under GST while emphasizing accountability on both
taxpayers and the Department.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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